SYNDICATE 5

Scenario Planning Stages

STAGE 5. INTEGRATION

Early warning signal developed

STAGE 4. OPTIONS CONSIDERATONStrategies, actions, and changes defined

STAGE 3. SCENARIOS CREATIONStrategies, actions & changes defined

STAGE 2. EXPLORATIONDriving forces defined

STAGE 1. ORIENTATIONFocal issue defined

IntroductionThis paper provides an analysis and case solution to a Harvard Business School case study on United Parcel Service (UPS). As it celebrated its eightieth anniversary in 1987, small package delivery king UPS faced a rapidly changing external environment which challenged the company’s long-established human resources management policies and threatened to disrupt the organizational culture that many believe is key to UPS’s success. The analysis:• Identifies and discusses the key issues and problems related to the fit between UPS’s current business strategy and its HR strategic plan and practices.

• Formulates an HR strategic plan to resolve these key issues and discusses how the proposed plan will support the current business strategy; and 3) elaborates on the staffing components of the proposed HR strategy.

Stage 1• History• It was formed in 1907, by 19-year-old Jim Casey. Originally, focused on delivering messages in Seattle . Over the 98 years since its founding, it had transformed itself several times.

• Several Transformations:• From messages to package delivery• To international air transport company• Finally, in the 1990s, to a logistics company

BackgroundAbout the company• The United Parcel Service (UPS) delivers more than 15 million packages a

day to about 6.1 million customers in 200 countries around the world, making it the world’s largest package delivery company

• UPS is headquartered in Atlanta, Georgia and operates primarily in the United States with about 428,000 employees

• UPS’ slogan “What can Brown do for you” emphasizes the company’s ability to provide services to almost any one in the world, at any address

• Before the $42 billion company grew into a worldwide name, it was started as a small messenger company in 1907 by two aspiring teenagers, Jim Casey and Claude Ryan in Seattle, Washington with just $100

• Top competitors of UPS include Federal Express (FedEx), DHL International and the United States Postal Service

 

• Background of the Company

In 2006, it was a $37 Billion corporation. It is world’s largest package-delivery company. The company was leader in specialized transportation and logistics and it Serves 200 countries. It had a 3,500 retail locations via purchase of Mail Boxes, etc. and employs 384,000. The company operates one of the 10 largest airlines

• Organization

 • CEO is Mike Eskew • The organization is centralized, hierarchal with traditional structure at the

top• Senior management and staff set direction, priorities, budgets, and

initiatives• Tactical at the regional level and is strategic at the corporate level• Low levels of autonomy at the regional level is also observed

• Competitors

Private postal companies• Federal Express

Large government-supported agencies• USPS• Deutsche Post

 • Until 1994, UPS had so heavily concentrated on continuously improving its

operations that it had compromised on quality and customer service. Many analysts commented that UPS did not pay attention to customer needs and customer satisfaction. In 1994, due to increasing competition, UPS realized the need to be more customer responsive and embarked on a major corporate transformation initiative. This case gives a detailed overview of the various human resources initiatives that UPS

• Culture•  • “Consensus building” and was focused on efficiency and execution. It

believed in continuous improvement of company. Strong values: service excellence, employee ownership, commitment to stability Low employee turnover, loyal workforce

• The Logistic Business Prospect

• The alliance between air freight companies and ITES companies will bring exponential growth to the Air Freight industry. This industry should remain attractive, with concentration on competition for market share, service differentiation, and brand image. Current Advertising has been aimed at being better than the competitor for different reasons.

•  

Value & Mission

Financial Performance

Timeline

Interview

• Key Focal Issue

- The future of UPS’s global business in an ever changing competitve environment- The future(s) of UPS’s world market and major regional

markets in 2017

Stage 2Marketing

Operation

Human Resouces

Finance

SWOT ANALYSIS

STRENGTHS WEAKNESSES

Global brand Strong distribution

network

Perception of ground delivery instead of overnight

Heavy union presence

OPPORTUNITIES THREATS

Expansion of online shopping

Emergence of international middle class

Increasing fuel costs Competitive landscape

(DHL, FedEx) Potentially slowing global

economy

FUNCTIONAL ANALYSIS (Marketing)OBJECTIVE: Provide a complete logistics infrastructure to

businesses of any size.

UPS is targeting a global market of producers and consumers, while making a move to become the supply chain integrator of choice in e-commerce.

• They offer products and services that are state of the art in logistics, which include the use of bar codes and RFID, high speed package routing systems, and consulting services.

• UPS charges package prices that are in alignment with the industry and is willing to raise prices alongside FedEx. It has been able to charge fuel surcharges successfully.

FUNCTIONAL ANALYSIS (Marketing)

• A sales force is maintained to reach business customers and producers crucial to UPS’ mission in expanding its role in logistics to become the supply chain integrator of choice.

• There are 150,000 different places to access UPS, worldwide. Customers can reach them by phone, web, retail outlets, customer service centers, distribution centers and any of the drivers will pick up packages. This level of reach to customers is necessary if UPS expects to gain market share from FedEx.

FUNCTIONAL ANALYSIS (Operations\ Tech)

OBJECTIVE: Highly integrated operations support product offerings to offer low cost delivery operations.

• UPS is seeking to integrate into freight with larger haul trucks and it is adding capacity in Asia and Europe with acquisitions of Sinotrans, a Chinese joint venture and Stolica, a Polish parcel and express company.

• UPS is the 11th largest airline world, with nearly 600 planes, 15 airport hubs worldwide and 900 airports served. Connecting these airports hubs to customers are 1,750 distribution facilities that sort packages into 90,000 trucks for deliveries to the home, office, and 72,000 retail outlets. All this requires the integration of air, ground, logistics and trade financing that UPS maintains is a key competitive strength.

FUNCTIONAL ANALYSIS (Human resource)

OBJECTIVE: A high sense of culture and esprit, stock participation plan, and promotion opportunities contributes to a low turnover rate of employees.

• The company is managed from a highly centralized Management Committee organized along for the most part in to functions as opposed to business units. There are business unit presidents in the Management Committee but only to the extent that the business unit is organized at a global or firm wide level.

• UPS is the US’s 3rd largest employer with nearly 400,000 employees worldwide.

FUNCTIONAL ANALYSIS (Finance)OBJECTIVE: Highly liquid company has been investing at a faster

rate than returning cash to investors, which are for most employees.

• The company is highly liquid with 1 ½ times the cash necessary to cover current liabilities. UPS increased its dividends at 20% per year for the past five years with an even higher growth in the rate it has been buying back stock, at 47% over the same period.

• The firm has been paying down debt over the last five years while steadily increased Fixed Assets and Working Capital, in line with developing the infrastructure to support the latest in logistics technology and their customers’ push towards JIT manufacturing. Over the past five years, Working capital has increased 24% per year.

FUNCTIONAL ANALYSIS (Finance)• The firm’s capital structure is in line with a company that has

been run by traditional long time employees. 50% of the capital structure is equity with the remaining sources of capital split between current liabilities at 20% and long term debt at 14%.

• The company is investing its cash in to Working Capital. The evidence there is a 28% growth rate in cash versus a 14% rate for Retained Earnings, which is experiencing a decelerating growth rate for the past five years.

Stage 3

Stage 4• Strategic Plans:

Four Strategic Imperatives:

1.Winning Team: attracting and developing a highly skilled, diverse, and aligned global workforce

2.Value-Added Solutions: providing customers with value-added services combining movement of goods, information, and funds

3.Customer Focus: building customer loyalty and expanding UPS’s services worldwide

4.Enterprise Excellence: creating an environment of high-quality service and value

The Four Scenarios

Tangled Paths

1. Highly competitive business environment

2. Strong regional and national regulations

3. Desire for more variation in products

Regressive World

4. Strong regional and national regulations

5. More traditional supply chain, competitive landscape, and set of consumers

Global Scare Prevails

6. Slow adoption of new technology due to stable demand

7. More traditional consumers and industry consolidation

Brave New World

8. Deregulated globalized marketplace

9. Mass customization of goods and services to proactive consumers

10. New forms of competition and virtual organizations—alliances and business webs

CHALLENGES • To make strategic technology group from a small strategic

planning process. This was basically required for finding major gap in technologies.

• Competition from both private companies and large government supported agencies.

• Execution of Scenario-planning session.• To tackle the impact of axis of uncertainty.• Formation of scenarios for future strategic planning.

CHALLENGES

• To manage the strategy road map and implement the centennial plan.

• To tackle the implication for technology and infrastructure initiatives, growth strategies and options, and workforce development at both the global and region level.

• Since most managers in the company were focused on short term goals. It was difficult to keep the perception in mind that this was not about UPS but rather how the world affected UPS.

• To resolve the strategic integration responsibility.

STEPS TAKEN BY UPS TO FACE THE CHALLENGES

• As opportunities arose, UPS had shifted from message delivery to package delivery.

• Several steps that unfolded over a period of years were involved in the implementation of the new strategic process. The senior management completed a crucial second step two years later in 1999,when they drafted the UPS charter, redefining UPS’s mission and purpose and providing a detailed statement of the company’s values and strategies.

• UPS moved from “leadership in package distribution” to “enabler of global commerce” due to the new mission and purpose.

STEPS TAKEN BY UPS TO FACE THE CHALLENGES

• The “centennial plan”, the third step in the strategic process was formed from the outcomes of that meeting. As UPS’s version of a five year strategic plan, it was designed to guide the company to its centennial anniversary by providing themes and broad, overarching direction. 

• “Strategy road map”, which was the fourth step in the strategic process was developed to take the centennial plan to an executable level of detail.

UPS Strategy – Plan Action

• Create the future through one company. One Vision. One Brand

1. Continue to expand our distribution and supply chain solutions to syncronize the world of commerce – the flow of goods, information and funds

2. Expand our position as a trusted broker between buyers and sellers wordwide

3. Harness the approriate technology to create new services and to strengthen our operations and networks

4. Attract and develop the most talented people whose initiative, good judgement and loyalty will help realize our company’s mission

5. Continually study customer’s behaviour, anticipate their needs and design our product and services to exceed their expectations

6. Create a practice of innovation that leads to sustainable growth

7. Maintain an environment that enables us to treat every customer as if they are our only one

8. We will leverage the UPS brand to maximize brand loyalty among constituencies

Stage• Scenario Planning (1997): to address distinctive UPS

challenges they brought in consultants from Global Business Network to facilitate a set of scenario planning workshops. These workshops were preceded by series of interviews inside and outside UPS that led to the definition of key focal issues facing UPS. Four different scenarios were developed by using combination of two axes (horizontal axis- Market Environment and vertical axis- Demand Characteristics). The four scenarios were namely: Tangled Paths, Regressive World, Global Scare Prevails and Brave New World. The session produced both tangible and intangible outcomes. The scenario planning results in change of company’s mission statement, definition of corporate charter, identification key themes and insights, creation of platform for management discussion and mind set shift for top management.

• Strategic Planning (1999): Senior management completed a crucial second step after two years. They drafted the UPS charter and moved UPS mission statement from “leadership in package distribution” to “enabler of global commerce”. The second step in the planning process also involved charting out the goals for the future. Planning for the coordinated working of the functional projects was also discussed. During this period company released its IPO.

• Centennial Planning (2002): The third step of Strategic planning process involves centennial planning as the company was about to celebrate its 100th anniversary. The CEO Mike Eskew convened a management committee meeting whose purpose was “to focus the group on kind of the company we are going to be in 2007 on our 100th anniversary.” The plan includes three components. The first was qualitative set of “Goals and characteristics for 2007”. Second was sense of corporate direction, with the goal of creating a global, unified company with “one vision and one brand”. Third component was identification of set of strategic imperatives.

• Strategy Road Map: “Strategy Road Map”, was developed to take centennial plan into executable level of detail. To ensure the implementation of the plan’s four strategic imperatives,(i.e.; Winning Team, Value added solutions, Customer focus, Enterprise excellence) individual Management Committee members selected from various functional areas were assigned responsible for each of them.

• The strategic planning process was well executed by UPS. It has changed the company to what it is today. The process gave a complete face lift to company with new charter, vision and mission. The success of this strategic plan can be seen throughout the organization and UPS’s functions. As UPS is no longer seen as US based package delivering company and it has clearly emerged into global enabler of commerce.